The Fine Gael and Labour Party outlined their joint programme for Government in Dublin today.

Fine Gael/Labour said that the outlook for the Irish economy is positive, but there can be no room for complacency. Our competitiveness and export performance has suffered from a Government-driven inflationary boom that has dramatically raised costs, led to the re-emergence of a large and growing external payments deficit and made the Irish economy too dependent on construction and the public sector for jobs growth.

The following is a summary of the  joint programme.

Progressive Income Tax Reform

Labour and Fine Gael have agreed a number of income tax measures that bolster the incomes of "hard working families" that have suffered from the "rip off" experience and that support the life choices of all families, including parents and other carers, in achieving their own preferred balance between paid work and unpaid care.

• A 2-point cut in the standard rate of tax from 20% to 18%
   
• Indexation of personal credits and bands to earnings and a further €5,000 increase in the point where 1-income married couples hit the top rate of tax
   
• An increase in the home carers' credit to the level of the PAYE credit

A Fairer Stamp Duty Regime

FG/Labour say they will introduce a fairer system of stamp duty that helps make housing for all families more affordable. Specifically, they will:

• Abolish stamp duty for first time buyers up to €450,000;
   
• Restructure stamp duty for others buyers as follows:
  o No stamp duty up to €100,000
  o On the next €350,000 a 5% rate will apply
  o On the balance a 9% rate will apply

The parties say that it is the role of Government to help families buy homes, not to get in their way. The present Stamp Duty regime has put young families under huge pressure. "Fianna Fail has presided over this unfair tax regime for the last decade and is resolutely opposed to its reform. In contrast reform of Stamp Duty will be a priority for Fine Gael and Labour in Government.

The timing of such a major change in taxation has to be decided by Government based on conditions in the market for those buying and selling homes and on the budgetary conditions.

On election to Government, Fine Gael and Labour will review these conditions and assess the best time to implement this priority as a single measure," the document says.

A Greener Tax System

Rebalance Vehicle Registration Tax to favour lower-emission vehicles; abolition of Excise Duty on biofuels produced from renewable energy crops.

Budgeting for Growth and Stability

Budgetary policy under a Fine Gael - Labour Government will rest on five pillars, according to the programme:

1. Fiscal Prudence and Economic Stability. All commitments are subject to the over-riding commitment to adhere to the EU Growth and Stability Pact.

2. Higher Capital Spending; Increase capital spending to the levels set out in the National Development Plan 2007-13 and will invest 1% of GNP in the National Pension Reserve (NPRF) annually.

3. Targeted Tax Reforms; Proposals have been costed at €3.4 billion in 2007 terms (€2.4 billion net), equating to an average annual tax relief package of €680 million each year in 2007 prices.

4. Better Public Services; On top of existing commitments across a range of public services, FG/Labour will fund additional day-to-day spending on health and policing services, as agreed in the joint policies on health and policing. When delivered in full, these will cost an additional €1.6 billion in 2007 prices.

5. Better Value for Money; To enhance Oireachtas scrutiny of expenditure, and civil service capacity in expenditure management; will clarify lines of accountability for Ministers and Civil Servants.

Ruairi Quinn TD and Labour Party Leader Pat Rabbitte TD with children in the Ringsend Crèche during a recent visit to the area.

More and Better Jobs

FG/Labour says the momentum to growth from construction will ease off in the coming years. This document sets out a 9-point plan to recover our lost international competitiveness and enter a more export-driven phase of growth.

1. Tax Competitiveness for Exporters; Maintain the 12.5% single rate of profits tax and expand of our tax treaty network with Asia.

2. Upskilling the Workforce; Develop a National Skills and Training System to progress 100,000 people by one level under the National Qualifications Framework, with a new 2-week statutory paid training leave paid out of the National Training Fund.

3. A "Next Generation" Telecoms; Will immediately extend broadband access across the country and create by 2012 a new, high speed, open access, Next Generation Network.

4. Competitiveness Through Research and Innovation; Will increase public funding for industry-led research and in-firm R&D and give greater attention to research areas of relevance to the services industry, including through the development of a new Institute of Advanced Studies in Applied Finance.

5. Ireland as a Life Science Leader; Will develop a National Life Sciences and Health Research Strategy to strengthen the relationship between industry, clinicians and researchers.

6. Less Regulatory Red Tape; Will deliver a 25% cut in the administrative burden (red tape) on companies.

7. The Green Economy; Will build a new Centre of Excellence for Alternative Energy Research and mandate ESB and Bord na Móna to become renewable energy leaders.

8. Faster and More Economical Delivery of Infrastructure; Will set up a Critical Infrastructure Commission to accelerate planning of key projects and a High Court for Infrastructure to accelerate judicial review of planning appeals.

9. Tighter Control of Utility Costs: Will give stronger powers to regulators in energy and telecoms and set up a new Competition Appeals High Court to accelerate regulatory appeals.

Economic and Budgetary Framework 2007-12

Assumptions Underpinning the Economic and Budgetary Framework

The Cost of Delivering Existing Public Service and Infrastructure Commitments

FG/Labour say they use the Department of Finance's cost estimates for delivering existing services commitments ("Baseline Voted Current Exchequer Spending") for 2007-09. The baseline growth rate in current spending is then set at 6.0%, 5.8% and 5.5% for 2010, 2011 and 2012 respectively, resulting in an annual average of 6% for 2008-12. For non-voted (Central Fund) spending, we use the Department's projections for 2007-09, and then step up spending to €5 billion by 2012.

These projections by the Department of Finance for 2007-09, and their own estimates for 2010-12, provide for:

- The rising cost of delivering existing public services, including the impact of public sector pay agreements and the rising cost of procured goods and services.
- Budgets of €1.1 billion and €2.7 billion available for allocation in 2008 and 2009 respectively to support emerging public services and welfare priorities.
- Fulfilment of current Government policy commitments across a range of areas, such as those made in the latest Social Partnership Agreement, Towards 2016.

The capital balance is identical to official projections for 2007-09, and for the entire period reflects our commitment to the capital spending targets set out in the NDP 2008-12 and to invest 1% of GNP in the National Pension Reserve Fund (NPRF) on an annual basis.

Economic Growth

FG/Labour say that although the economy is confronted by a number of challenges, the picture set out in these forecasts remains positive, with an average growth rate (in both GDP and GNP terms) of 4.2% per annum (in real terms) projected over this period, compared with 5.0% per annum over the 2002-07 period.

The real and nominal growth forecasts for 2007-09 are identical to those by the Department of Finance. While the Department does not make forecasts beyond 2009, FG/Labour have fixed their  projections for growth and inflation for the period 2010-2012 at 2009 rates. This brings the forecast for nominal GDP by 2012 to just below the High Growth Forecast by the ESRI in its latest Medium Term Review.

Reconciliation between the Exchequer and General Government Balance

The General Government Balance is the broadest measure of State revenues and spending, and is also the measure subject to EU fiscal rules. The difference between the Exchequer Balance and the General Government Balance reflects a number of technical adjustments, primarily for transactions relating to Local Government and the Social Insurance, National Training and National Pension Reserve Funds.

The projections for the difference between the Exchequer Balance and the General Government Balance for 2007-09 are taken from the Department of Finance. For 2010-12, the reconciliation is then pegged at the 2009 ratio of 1.3% of GDP.